tension rises between Berlin and Beijing

Germany says goodbye to its “China city”. In Duisburg, a city of 500,000 inhabitants in the leading European economy, a smart city was to be built, an intelligent city on the Chinese model. The project would have been developed by the Asian giant Huawei, which ended up in the US and Canadian crosshairs because it was accused of espionage, and therefore classified as an internal threat. But for the project between the Chinese giant and the German city administration, something went wrong.

To give the exclusive news is the South China Morning Postwhich lines up the facts and reconstructs what happened behind the scenes, recounting what led the Duisburg administration (led by the SPD, the same party as chancellor Olaf Scholz) not to renew the memorandum, which expired last month, which linked it to Huawei since 2018.

Relations between Russia and China weigh

The document signed four years ago between the administration of the German urban center and the Chinese giant presented the idea of ​​transforming Duisburg “from a traditional industrial city into a service-oriented smart city”, modernizing its public administration, port logistics , education and traffic infrastructure, using advanced 5G technology. The deal would have linked the Duisburg city administration to Huawei through its IT infrastructure. The non-renewal of the memorandum, according to sources in the Hong Kong newspaper, is due to “current relations between Russia and China”.

Scholz achieves unexpected success in controversial visit to China

But there’s more to it, too, and it has to do with the German government’s internal controversy over national infrastructure being sold to Chinese companies. The breaking of the link with Huawei (already suspended since 2020 due to the Covid-19 pandemic), marks a change in policy from the city, which had opened the doors to Chinese investments and presented itself as the “gateway to the ‘Europe’ of China. Duisburg has had relations with the People’s Republic of China since the 1980s and in recent years it has continued its collaboration with the Asian giant and its companies, despite the doubts that have arisen about Huawei’s strategic role in European 5G infrastructures.

The port of Duisburg abandoned by Cosco

The economic and infrastructural crisis in the Ruhr region, of which Duisburg is a part, has in fact been an excellent magnet for attracting Chinese interests, especially for its inland port, the largest in the world. The Duisburg terminal was presented as an official part of China’s Belt and Road Initiative (BRI) in 2013, promoted to this level by Chinese President Xi Jinping’s visit the following year: an acknowledgment that arrived already in 2011, when the first railway exchanges with the Chinese city of Chongqing.

In a decade, the local economy has changed and now 40 thousand workers are engaged in the port of Duisburg, whose main activity is Chinese trade. But something happened recently. The China Ocean Shipping Company (Cosco) – which recently received the green light from the government of Olaf Scholz for the acquisition of a 24.9% stake in the German port of Hamburg, against the previously planned 35% – has sold its actions in the port terminal of Duisburg. And he did it without much hesitation or much explanation.

Will Germany really sell the port of Hamburg to China? Scholz’s trip to Beijing

Berlin protects national chip industries

The doors to Chinese companies are also closing at the federal level to protect the high tech sector. Berlin blocked the takeover by Chinese investors of two domestic semiconductor companies. The latest agreement, in chronological order, is the one blocked by German Economy Minister Robert Habeck, which, according to the Handelsblatt newspaper, concerns the microchip company ERS Electronic.

The other stop came from Berlin last November 7 to block the acquisition of the Elmos industry based in Dortmund by the Chinese-owned Silex Microsystems. Elmos is one of the smallest German semiconductor companies, mainly producing chips for the automotive industry. For the head of the German economy, the sales would jeopardize public order and security in Germany, and “softer means” than a veto would not be adequate. In short, priority given to the defense of the technological and economic sovereignty of Germany and Europe.

The German government’s decisions on Elmos and ERS came just days after Chancellor Scholz’s criticized visit to China. The German executive wants to try to balance the push of national companies towards the Chinese market with the intention of reducing Germany’s commercial dependence on China.

Berlin tries to say goodbye to Made in China

Beijing’s ambitions

Berlin’s latest decisions put Beijing’s plans at risk, which is hungry for semiconductors: no other country in the world buys as many chips as China. The People’s Republic has held this record since 2005. A record that rose to the top of the Chinese government’s agenda in 2015. With the “Made in China 2025” national strategic plan, in turn embedded in the traditional five-year plans launched by Beijing, China has set itself the goal of being self-sufficient in “key materials” by 2025.

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And these also include microchips. The Chinese giant aims to cover 70% of its semiconductor needs with domestic producers. But the strategic plan does not specify whether that 70% will also end up with semiconductors produced by foreign companies inside the Wall.

Thus Beijing, while carrying out massive domestic investments to boost the microchip industry, is trying to hoard foreign industries. As a result, China is also rapidly becoming a divisive issue in German politics. And Berlin seems not to have learned much from the mistakes it made due to its excessive dependence on Russia.